Barclays on U.S. Autos & Auto Parts: Market Implies 45-49% Probability of Double Dip - Yet Sales Still Just Stalled
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Barclays on U.S. Autos & Auto Parts: Market implies 45-49% probability of double dip - yet sales still just stalled
Barclays analyst, Brian A. Johnson, said, "August sales appear just stalled but market has moved to price in a double dip. Last week, we outlined three scenarios for sales through 2013: a slow continued recovery, a stall at current levels, and a double dip downturn. Today, we are initiating a regular 'what is priced in' report, in which we estimate the market derived probabilities for our sales scenarios based on prior day closing prices. We believe the market is pricing in a 45-50% probability of a double dip - yet sales for August appear to be tracking to 12.1-12.2 million, consistent with the stall scenario. While this is encouraging for an optimistic longer term view of the stocks, a stalled August is likely to do little to dispel concerns about a deeper fall later in the year, and hence auto stocks are likely to remain under pressure. Notably, Dana (NYSE: DAN), Lear (NYSE: LEA) and Tenneco (NYSE: TEN), along with Meritor, Inc (NYSE: MTOR), are closest to having priced in a double dip, with implied double dip probabilities from our simple regression model of around 60%, versus the sector average of 45-50%."
"Early indications for August sales are coming in the 12.1 to 12.2 million range, in line with last month's 12.2 million and more indicative of a stall than a collapse in demand. Retail sales appear to have taken an encouraging step up, rising to an estimated (per JD Power and Edmunds) 9.9 million, up from 9.5 million in July. Fleet, which is traditionally light in August, appeared to have contracted to 2.2 - 2.3 million units, versus 2.7 million last month and a 1H11 run rate of 2.3 million. Overall, August seems consistent with our belief that the US SAAR is roughly stalled at 12.7 million adjusting for quake impacts, and that deferred purchases (both retail and fleet) would lift sales later in the year above 13 million even with a stalled consumer."
Other stocks of note: Ford (NYSE: F), GM (NYSE: GM), Nissan (Nasdaq: NSANY), Johnson Controls (NYSE: JCI), Toyota (NYSE: TM) and
Barclays analyst, Brian A. Johnson, said, "August sales appear just stalled but market has moved to price in a double dip. Last week, we outlined three scenarios for sales through 2013: a slow continued recovery, a stall at current levels, and a double dip downturn. Today, we are initiating a regular 'what is priced in' report, in which we estimate the market derived probabilities for our sales scenarios based on prior day closing prices. We believe the market is pricing in a 45-50% probability of a double dip - yet sales for August appear to be tracking to 12.1-12.2 million, consistent with the stall scenario. While this is encouraging for an optimistic longer term view of the stocks, a stalled August is likely to do little to dispel concerns about a deeper fall later in the year, and hence auto stocks are likely to remain under pressure. Notably, Dana (NYSE: DAN), Lear (NYSE: LEA) and Tenneco (NYSE: TEN), along with Meritor, Inc (NYSE: MTOR), are closest to having priced in a double dip, with implied double dip probabilities from our simple regression model of around 60%, versus the sector average of 45-50%."
"Early indications for August sales are coming in the 12.1 to 12.2 million range, in line with last month's 12.2 million and more indicative of a stall than a collapse in demand. Retail sales appear to have taken an encouraging step up, rising to an estimated (per JD Power and Edmunds) 9.9 million, up from 9.5 million in July. Fleet, which is traditionally light in August, appeared to have contracted to 2.2 - 2.3 million units, versus 2.7 million last month and a 1H11 run rate of 2.3 million. Overall, August seems consistent with our belief that the US SAAR is roughly stalled at 12.7 million adjusting for quake impacts, and that deferred purchases (both retail and fleet) would lift sales later in the year above 13 million even with a stalled consumer."
Other stocks of note: Ford (NYSE: F), GM (NYSE: GM), Nissan (Nasdaq: NSANY), Johnson Controls (NYSE: JCI), Toyota (NYSE: TM) and
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